One of the last things on our early retirement to do list was selling our house. We had a cute little bungalow built in 1937, and there were always maintenance issues. Although the housing market had bounced back quite a bit, especially where we lived in San Jose, we were still worried about the amount of time it might take to sell it and whether we would get any more than we paid for it. We thought we might be extremely lucky if we got $50,000 to $75,000 more than the $625,000 we paid.
We bought a copy of the book How to Sell a House Fast in a Slow Real Estate Market: A 30-Day Plan for Motivated Sellers. It was full of great information, but it also made us feel very discouraged about how long it could take to sell our house. Although we were in a hot market, our house was far from turn-key and had many issues that you might expect of an older home (noticeable settling, cracked ceilings, foundation repair, etc.).
After reading the book, we were prepared to wait several months for our house to sell. Although we ended up having a much better experience than we expected, reading the book allowed us to enter into it with a better understanding of the terminology and process. For instance, we learned the difference between the listing and selling agent (the selling agent actually represents the buyer). I would definitely recommend the book if you are selling a house, especially for first-time sellers, regardless of whether you are in a hot or slow market.
Despite our desire to save money, we chose not to go the for sale by owner route, because we wanted to sell the house quickly and because we were first-time sellers. We just didn’t have that much time or energy to prepare with our work and long commute. Much of our spare time was dedicated to purging the bulk of our belongings. Also, with FSBO, you still have to offer a commission to the selling agent which would probably run about 2 to 2.5%, thus substantially limiting the benefit of a FSBO.
About nine months before selling our house, we started a spreadsheet tracking similar houses for sale in our zip code. We tracked the houses that went on the market, the list prices, price reductions, number of days on market, and the eventual sale prices. We went to as many open houses of similar homes as we could. Even though we were in a hot market, some houses still did not sell during that nine months. For example, our neighbor’s house didn’t sell on the market because of major foundation issues. A developer bought it as a tear-down instead.
Once we started to meet with real estate agents, our fears began to dissipate a little. All three agents thought we could get $750,000. They also said that there wasn’t a lot of starter home inventory in our desirable Willow Glen neighborhood, so the sooner we could get it ready for market, the better. We selected an agent that we really liked and whom we felt would do everything he could to sell our house quickly.
One of the things that helped us select an agent was the commission. A typical commission in our area at the time was 5%, split between the buying and selling agents. The agent that we selected offered us a 4.5% commission, meaning, he would end up with 2% and the other agent would receive 2.5%. However, I think we would have still selected this agent, as we liked him the best of those we met with. He knew a lot about our area and was very knowledgeable about maintenance issues in older homes.
When we signed the contract with our agent, we told him we thought it would take another month or so to get our house ready. We needed to paint some of the rooms, repair some wall damage that our dog perpetrated, and have the backyard landscaped. We had been setting aside money for repairs, and had $10,000 reserved for this when we were ready to sell the house. The main danger of putting your house on the market without getting it in shape to show is that it won’t sell quickly and if it sits on the market for a long time, people will start to think something is wrong with the house. But if someone looks at the house when it is not on the market, then it won’t affect the attitudes of future potential buyers. In our case, since it wasn’t on the market yet and we hadn’t had any inspections, the buyers paid for the house inspection report (saving us roughly $1k) and the agent paid for the termite report. It was also extremely helpful that we had saved all the inspection reports (structural, termite, etc.) from when we bought our house and were able to provide those to the buyers.
Our agent asked us if we would be willing to show the house to one or two potential buyers before it went on the market. We would have the opportunity to sell it as is without making any repairs. These were couples who bid on other houses he was selling, but were outbid by other buyers. This would mean there wouldn’t be any bidding wars on our house, but it would save us a lot of time and money. We elected to let one of the couples come see the house a couple days after we signed with our agent. There was another similar house on the market that would be accepting bids soon, so we wanted to give them the opportunity to make an offer on our much nicer house first. They were extremely motivated buyers, as they had already sold their house, so they needed to buy a new house before they had to be out of theirs.
The couple fell in love with our house (which was extremely similar to their house that they just sold) and the next day we had an “as is” offer for $765,000 for the house. We felt that if we waited and solicited multiple bids, at most we could get $10,000 to $20,000 more. But we would also have to spend around $10,000 for repairs and beautification and wait an additional one to two months, when there would be more competition on the market. Plus we were starting to get extremely burnt out at work. We accepted the offer and went into escrow the next day.
One thing that helped us decide to accept the offer was that a completely remodeled nearby house with the same square footage was featured in a newspaper article and sold for $790,000. Only our kitchen was remodeled, and although our house had a lot of charm, it still needed significant updating and repairs.
We had a 21-day escrow with seven days of contingency in case the inspections turned up something awful and unexpected (they didn’t). We also got a free rent-back for another month after the close of escrow, since they had just sold their house and they didn’t need to be out of it until then. We actually ended up having to scramble to quit our jobs and get ready to move because our house sold more quickly than we expected. But I feel like we had a really good experience for first-time sellers.
On a side note, selling our house ending up being especially lucrative for our agent. A developer was building a new house next door to ours, and it was much larger and more expensive. At the time we sold our house, the new house was almost completed. When they saw a sold sign suddenly appear in our yard without a for sale sign sitting there for weeks, they called our agent. He ended up selling that house as well, and of course got a much larger commission.
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